Apartments outpace new homes

There were 1,076 building permits for multifamily units in Springfield in 2007, up 8.5 percent from 2006 and more than double the total in 2002, according to city data. Multifamily units also outpaced their single-family counterparts last year by more than five to one.

Multifamily developers attribute the growth to a combination of increased demand from a steadily growing college population and growing numbers of homeowners re-entering the renting ranks due to the weakened ownership market. They also cited increased emphasis on infilling city property, which lends itself more easily to multifamily development.

“There’s just not that much vacant land (in the city), and what vacant land was in the city was skipped over for a reason – there were sinkholes or topography issues,” said Ralph Rognstad, the city’s planning and development director. “Now people are going back and trying to develop those, and it just doesn’t work that well for single-family” because of increased development costs.

Driving forces

Matt Bailey, president of development firm The Bailey Co., said the driving force for his company, as it has been for many years, is the area’s college population. The Bailey Co. is the general contractor on the $7 million Phase I of The Villages at Nathanael Greene, which includes 108 units and a clubhouse.

Bailey, who is part owner of 460 units in Springfield and Ozark with father Howard Bailey, downplayed the effect of the economic downturn on the increase in multifamily demand; he pointed out that the growth in multifamily building permits really began in 2002, well before the current economic conditions took hold on the single-family housing market.

“I’ve read that in a down time like this, when people are having a hard time affording down payments, they usually rent, and I think it will help (drive leasing) in this market,” Bailey said. “But it’s not the underlying factor. … The apartment market has been strong for years.”

Bailey admitted that the economy does factor in to a developer’s decision to build new units or wait, but he doesn’t see a huge impact right now from people moving from property ownership to rental. He noted that occupancy rates for his properties have held steady at 90 percent to 95 percent.

Gauging market saturation

Still, with the more than 4,000 apartment units permitted since 2002, even some developers are starting to talk about the possibility of market saturation.

“I think we’ve reached a point where it’s getting harder and harder to lease them,” said Sam Coryell Sr., principal of TLC Properties, which manages more than 2,200 apartment units and will add another 700 by early 2009. “We have to do a lot more marketing now than we used to. … There definitely has been a change in the atmosphere of the market over the last couple of years.”

Bailey, too, said that his company has taken a hard look at the more than 20,000 units on the market; he said Bailey Co. has pushed back the timetable on the last phase of the Nathanael Greene project in order to get a better handle on demand.

“I worry that some day it will get saturated,” he said. “(Building) is not going to end, but it could slow down.”

While multifamily growth was part of the reasoning behind support for the Multi-Family Development Location & Design Guidelines approved in 2007 (see sidebar) development director Rognstad said the city has no desire to step in and stop development. [[In-content Ad]]